In re Hill

• Decision Date: 04 December 2002
• Docket Number: No. 00-14058DWS.,00-14058DWS.
• Citation: 286 B.R. 612
• Parties: In re Cary Scott HILL, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

286 B.R. 612

In re Cary Scott HILL, Debtor.

No. 00-14058DWS.

United States Bankruptcy Court, E.D. Pennsylvania.

December 4, 2002.

John Francis Murphy, Esquire, Doylestown, PA, for Debtor.

Leslie Puida, Esquire, Goldbeck, McCafferty & McKeever, Philadelphia, PA, for Movants.

Edward Sparkman, Esquire, Philadelphia, PA, Chapter 13 Trustee.

Dave P. Adams, Esquire, Office of the U.S. Trustee, Philadelphia, PA, United States Trustee.

MEMORANDUM OPINION

DIANE WEISS SIGMUND, Bankruptcy Judge.

Before the Court is the Objection ("Objection") of the debtor Gary Scott Hill ("Debtor") to the claim of Matrix Financial Services Corp. ("Matrix"), the holder of the mortgage on Debtor's residential real property. For the reasons that follow, the Objection will be sustained.

BACKGROUND

On March 30, 2000, when Debtor commenced his bankruptcy case, he filed Schedules listing Matrix as his only secured creditor and listing its claim in the amount of $88,000. On the same date, Debtor filed a Chapter 13 plan, which he served on Matrix, providing for "[f]ull payment on the secured arrearage claims" and further stating:

Holders of allowed secured claims shall retain the liens securing such claims and shall be paid in full on arrearages. The mortgage will be reinstated upon the payment in full by the debtor, through the Chapter 13 trustee's disbursements, of the pre-petition default on the mortgage and on the payment by the debtors of all post-petition payments being paid. The pre-petition default will be cured over the term of the plan.

Exhibit D-7.

On August 28, 2000, Debtor filed a secured claim on Matrix's behalf in the amount of $88,000, the arrearage component of which was $4,000. Exhibit D-6. One month later, on September 28, 2000, Debtor's plan was confirmed with the above-stated language proposing to cure Matrix's arrears over the life of the plan. Approximately two months later on December 13, 2000, Exhibit D-9, Matrix filed its own proof of claim listing the total amount of its claim as $105,692.37 and the arrears at $16,853.33. Exhibit D-2. Debtor objects to Matrix's claim on the ground that it was filed late and seeks an order striking the claim in full. In the alternative, Debtor seeks an order reducing both the total amount of the claim and the arrearage amount.¹ While Matrix did not file a response to the Objection, at the hearing it disputed Debtor's contention regarding the arrearage amount. In addition, in its response to Debtor's Motion to Modify Plan, Matrix stated that its Proof of Claim constitutes an amendment to the Proof of Claim which Debtor filed on its behalf. See Response of Matrix Financial Services Corp. to the Debtor's Motion to Modify after Confirmation Debtor's Chapter 13 Plan with Debtor's First Amended Plan Dated June 28, 2002 ("Response to Motion to Modify Plan") at ¶¶ 10-11, 24.²

DISCUSSION

I.

As a general rule, a secured creditor in a Chapter 13 case is not required to file a proof of claim but may choose to ignore the bankruptcy proceeding and look to its lien for satisfaction of the debt. Federal Deposit Insurance Corporation v. Union Entities (In re Be-Mac Transport Company, Inc.), 83 F.3d 1020, 1025 (8th Cir.1996); Tepper v. Burnham (In re Tepper), 279 B.R. 859, 864 (Bankr.M.D.Fla.2002); Lee Servicing Company v. Wolf (In re Wolf), 162 B.R. 98, 105-06 (Bankr.D.N.J.1993). However, Bankruptcy Rule 3004, which is "intended to foster the fresh start policy of the Bankruptcy Code," 9 COLLIER ON BANKRUPTCY ¶ 3004.01, at 3004-1 (15th ed.), provides that if a creditor, including a secured creditor, fails to file a proof of claim by the first date set for the meeting of creditors, the debtor may do so in the name of the creditor within 30 days after expiration of the bar date for filing claims. Fed.R.Bankr.P. 3004. The Advisory Committee Note to Bankruptcy Rule 3004 explains the purpose of this rule, stating:

It is the policy of the Code that debtors' estates should be administered for the benefit of creditors without regard to the dischargeability of their claims. After their estates have been closed, however, discharged debtors may find themselves saddled with liabilities, particularly for taxes, which remain unpaid because of the failure of creditors holding nondischargeable claims to file proofs of claim and receive distributions thereon. The result is that the debtor is deprived of an important benefit of the Code without any fault or omission on the debtor's part and without any objective of the Code being served thereby.

Section 501(c) of the Code authorizes a debtor or trustee to file a proof of claim for any holder of a claim. Although all claims may not be nondischargeable, it may be difficult to determine, in particular, whether tax claims survive discharge. To eliminate the necessity of the resolution of this troublesome issue, the option accorded the debtor by the Code does not depend on the nondischargeability of the claim.... The authority to file is conditioned on the creditor's failure to file the proof of claim on or before the first date set for the meeting of creditors....

Fed.R.Bankr.P. 3004 advisory committee's note (citations omitted).

Rule 3004further provides that if the creditor (on whose behalf the debtor filed a claim) thereafter files its own proof of claim "pursuant to Rule 3002," then the creditor's claim will "supersede the proof filed by the debtor[.]" Id. Rule 3002(c) states, in pertinent part: "In a ... chapter 13 individual's debt adjustment case, a proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meetings of creditors called under § 341(a) of the Code[.]" Fed.R.Bankr.P. 3002(c). Courts have held that a claim filed "pursuant to Rule 3002" must be filed by the time deadline imposed by subsection (c) thereof.³ See In re Cook, 205 B.R. 617, 622-23 (Bankr.N.D.Ala.1996) (reasoning that "[a] claim filed `pursuant to Rule 3002' must be filed in accordance with the restrictions and limitations imposed by Rule 3002 ... [which includes] the deadline imposed by Rule 3002(c)."); In re Duarte, 146 B.R. 958, 961 (Bankr.W.D.Tex.1992) ("If the creditor files a proof of claim within the time provided in Rule 3002(c), the creditor's claim will supersede the debtor's [claim.]"). See also 9 COLLIER ON BANKRUPTCY, supra, ¶ 3004.06, at 3004-4 — 3004-5 ("[I]n order for the creditor's filing to supersede the Rule 3004 claim, the creditor's claim must be filed pursuant to Rule 3002 [which] means that the claim must be filed by the creditor prior to the bar date."). The Advisory Committee Note that was added with the 1987 amendment to Rule 3004 supports this interpretation of the rule.⁴ If a creditor fails to timely file its proof of claim under Rule 3002(c), then the "debtor's claim filed pursuant to Bankruptcy Rule 3004 will stand." In re Hydorn, 94 B.R. 608, 612 (Bankr.W.D.Mo.1988) (citing 8 C OLLIER ON BANKRUPTCY ¶ 3002.03 (15th ed.1988)). See also 9 COLLIER ON B ANKRUPTCY, supra, ¶ 3004.06, at 3004-4 to 3004-5 ("[I]f the creditor fails to file timely, the claim filed pursuant to Rule 3004 will stand[.]").

In the instant case, the first meeting of creditors was held and concluded on May 24, 2000. Consequently, the claims deadline was September 26, 2000. On August 28, 2000, when Matrix had not yet filed a proof of claim, Debtor did so on its behalf. Matrix thereafter filed its proof of claim, but not until December 13, 2000. Thus, Matrix failed to file a proof of claim capable of superseding the Debtor's proof of claim.⁵

II.

Seemingly conceding that its claim was not filed within the time frame required to constitute a "superseding claim," Matrix attempts to characterize its claim as an amendment to the Debtor's claim. While Matrix offers no authority for this characterization of its claim, I note that in United States v. Kolstad (In re Kolstad), 928 F.2d 171 (5th Cir.1991), the Fifth Circuit held that a bankruptcy court has discretion to allow a creditor to file an amendment to a timely proof of claim filed on its behalf by a debtor despite the fact that, under Rule 3004, the time period for the creditor to file a proof of claim that would supersede the debtor's proof of claim has expired. The debtor in this Chapter 11 case filed a proof of claim for approximately $20,000 on behalf of the IRS after it failed to file a proof of claim before the bar date had passed. About ten months later but before the hearing was held on the debtor's plan of reorganization, the IRS filed an "amended" proof of claim asserting that the correct amount of its claim was $85,882.67. The debtor objected to the amendment but the bankruptcy court allowed it.

On appeal to the Fifth Circuit, the debtor argued that: (i) the IRS had lost the right to file its own proof of claim when it failed to do so, or request an extension of time for doing so, before the bar date had passed; and (ii) the IRS' right to file a proof of claim was not reinstated when he elected to file a proof of claim on its behalf in order to bring the IRS within the scope of his reorganization proceeding. Id. at 173. In other words, the debtor argued that, although he could force the IRS to participate in his plan of reorganization by filing a claim on its behalf under Rule 3004, the IRS had no right to file an amendment to the proof of claim stating what it believed to be the correct amount of its claim. The Fifth Circuit rejected this view of Rule 3004, stating in relevant part:

The fact that ... Rule 3004 may be invoked to force the IRS to participate in the reorganization process does not mean that [the debtor] also gains unilateral control of the amount of the IRS' claim. If a Rule 3004 proof of claim permitted a debtor to fix beyond challenge the amount of the involuntary participant's claim, the debtor would also control that creditor's share of the distribution of the estate. Such an interpretation of Rule 3004 carries a serious potential for abuse, because it...